Bank lending to small businesses is “not in great shape”, Vince Cable has
admitted as he revealed 13,000 companies had applied for loans under a
government scheme.

The Business Secretary said that regulatory pressures on banks and lack of demand was making bank lending a “moving and difficult target”.

He told the Business Innovation & Skills Select Committee: “Bank lending is not in great shape, but that’s not for the want of trying by government.”

He added: “We’re trying a variety of different mechanisms… but it’s an up-hill struggle because banks are trying to delever – they are trying to restock their capital bases in response to demanding regulatory targets and there’s a lack of demand in the market.” Mr Cable said 13,000 companies had sought loans worth a total of £2bn under the Government’s credit easing programme, which is designed to compensate for the banks’ reluctance to lend.

The National Loan Guarantee Scheme began in March, with the aim of making £20bn of discounted loans available to small companies. Last month, the scheme was extended so that companies with revenues of up to £250m could apply, rather than only those with a turnover under £50m.

Mr Cable agreed with the MPs’ views that the wider policy of quantitative easing was a “great unknown”. He said ministers “need to think much more carefully about its effects”, but argued it could not be seen as the Government’s only effort to boost growth